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Change to UK Deficit Plan Could Hurt Rating: Fitch

Matt Clinch, special to CNBC.com
Tuesday, 21 Aug 2012 | 5:55 AM ET

The U.K. faces a risk to its current triple-A rating, if the government steers away from its planned austerity drive, David Riley, Head of Global Sovereign Ratings at Fitch Ratings has told CNBC.

Steve Allen | Photodisc | Getty Images

“I think throwing out plan A, without a credible plan to bring down what is still a very large deficit, that is still rising in the U.K. at a very rapid rate, does pose some risk,” he told CNBC Tuesday.

“We think there is actually limited room for maneuver for the British government to do some kind of stimulus measures to try to get the economy going,” he said.

Riley said the U.K. economywasn’t growing because it was going through the aftermath of the financial crisis and the credit bubble. He said a lack of infrastructure wasn’t holding back growth, though he added that spending on infrastructure wouldn’t necessarily be viewed negatively by ratings agencies and bond markets.

UK Has Limited Room to Manoeuvre: Fitch
David Riley, global managing director of sovereign ratings at Fitch Ratings, told CNBC, there is limited room for the UK government to stimulate the economy and the euro zone will make it hard to meet debt targets.

Riley concluded that policy makers in the U.K. and ratings agencies have to look at national economies from different viewpoints.

“What might be the best growth-oriented policy response may not necessarily be compatible with the U.K. or other countries retaining their triple-A status,” he said.

“And it’s not the end of the world if they lose their triple-A [rating], as we’ve seen elsewhere.”